CHAPTER XVII
Section 138
PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS
IN THE ACCOUNTS
Where any cheque drawn by a person on an account maintained by him with a
banker for payment of any amount of money to another person from out of that
account for the discharge, in whole or in part, of any debt or other liability,
is returned by the bank unpaid, either because of the amount of money standing
to the credit of that account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account by an agreement made
with that bank, such person shall be deemed to have committed an offence and
shall without prejudice to any other provisions of this Act, be punished with imprisonment
for
["a term which may
extend to two year"], or with fine which may extend to twice the amount of
the cheque, or with both:
Provided that nothing contained in this section shall apply unless-
(a) The cheque has been presented to the bank within a period of six months
from the date on which it is drawn or within the period of its validity,
whichever is earlier.
(b) The payee or the holder induce course of the cheque, as the case may be,
makes a demand for the payment of the said amount of money by giving a notice,
in writing, to the drawer, of the cheque,
["within
thirty days"] of the receipt of information by him from the bank regarding
the return of the cheques as unpaid, and
(c) The drawer of such cheque fails to make the payment of the said amount
of money to the payee or, as the case may be, to the holder in due course of
the cheque, within fifteen days of the receipt of the said notice.
Explanation: For the purpose of this section, "debt or other
liability" means a legally enforceable debt or other liability
AS PER SECTION 25 (5) OF PAYMENT AND SETTLEMENT SYSTEMS ACT 2007 applicable
in case of ECS
(5) The provisions of Chapter XVII of the
Negotiable Instruments Act, 1881(26 of 1881) shall apply to the dishonour of
electronic funds transfer to the extent the circumstances admit.
For the purposes of this section,
"debt or other liability" means a legally enforceable debt or other
liability, as the case may be.
.
The Supreme Court has ruled that criminal proceedings for issuing a cheque
without sufficient balance in the account would be valid only if it is drawn
for discharging a debt or liability. If it is issued to satisfy the terms of a
compromise or settlement, Section 138 of the Negotiable Instruments Act could
not be used to proceed against the drawer of the cheque. The payee or the
holder in due course (Receiver) should have issued a notice in writing to the
drawer (Who issued the cheque)
with in thirty days of the receipt of
information by him from the bank regarding the return of cheque as unpaid.
After the receipt of the said notice the
drawer should pay the cheque amount with in fifteen days of the receipt of the
said notice.
On non-payment of the amount due on dishonoured cheque within fifteen days
of the receipt of notice by the drawer, the complaint should have been filed
within one month from the date of expiry of grace time of fifteen days, before
a Metropolitan Magistrate not below the rank of a Judicial Magistrate of the
First Class. The cognizance of a complaint may be taken by the court after the
prescribed period, if the complaint satisfies the court that he had sufficient
case for not making complaint within such period.
The Offence under this act is compoundable
In ILR 2000 Kar. 1570 (DR.
K.G. RAMACHANDRA
GUPTHA VS. DR. G. ADI NARAYAN) it has
been held by the Hon’ble High Court that there is a presumption U/s. 139 of the
N.I. Act that cheques have been issued towards discharge of an antecedent
liability and it is for the accused to rebut the said presumption by adducing
evidence and the burden is not on the complainant to prove that the cheques in
question have been issued towards discharge of a debt or other liability
